Truck 'shops' warned on credit law

The Commerce Commission has warned four companies
operating mobile shops in the North Island that they may be
breaching the Credit Contracts and Consumer Finance Act
(CCCF Act) by not disclosing important information to
customers.

The Commission has issued warnings to Lync NZ
Limited, Suny Pacific International Limited, Impact Door to
Door Limited and The Good Guys Limited. They operate mobile
shops in areas including south Auckland, Northland, Bay of
Plenty and Waikato.

Mobile shops are trucks which are
fitted out with a range of products, including clothing,
bedding, furniture, electrical appliances and food, which
allow people to shop from home. Customers can pay for their
purchases using credit provided by the mobile shop.
Customers who purchase items on credit are required to sign
up to regular automatic payments or direct debits.

The
four companies failed to disclose important information to
customers buying goods on credit, such as credit fees and
charges, how and when payments are to be made, default fees,
annual interest rates and how they are calculated. They also
failed to provide customers with details of security
interests taken over people's assets, and to inform
customers of their rights, including the right to cancel and
the right to repay early.

"These contracts are totally
deficient," says Fair Trading Manager Graham Gill. "If
businesses are going to offer goods on credit, then they
have to comply with the CCCF Act. If they don't provide
adequate disclosure to customers then the contracts can't
actually be enforced.

"Furthermore, if they make
representations that the contracts can be enforced, or
attempt to enforce them, they are likely to be in breach of
the Fair Trading Act."

While businesses need to be aware
of their obligations under the law, customers also need to
know their rights, Mr Gill added. "Disclosure of information
is the cornerstone of the CCCF Act. It allows customers to
be fully informed about the true cost of credit, to compare
competing credit offers and make a decision as to whether
they purchase the goods with cash or on credit."

"Our
advice to anyone thinking of entering into a credit
arrangement with mobile shops is to obtain sufficient
information so they can so they can compare prices and
services and be aware of their full obligations. Having that
information will also allow them to shop around and find the
best deal."

Background

CCCF Act Credit Contracts and
Consumer Finance Act - A general guide for the credit
industry can be downloaded from the Commerce Commission's
web site www.comcom.govt.nz

Penalties The court may order
a creditor to pay statutory damages to customers where they
have failed to disclose adequately under the CCCF Act and
can also impose fines of up to $30,000 per offence under the
CCCF Act and up to $200,000 under the Fair Trading
Act.

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